January 31, 2008

Interesting article in the Indy yesterday. Trouble is, when it comes to biofuels, logic and journalism seem to be totally incompatible. Take this section (my emphasis):

“…it is hoped that algae farms could use the CO2 waste from power stations, creating the possibility of power plants that produce fuel simply as a by-product of electricity, rather than pumping tons of CO2 into the atmosphere (1). Shell says a 1,000-hectare algae facility would absorb 300,000 tons of CO2, which, even factoring in the fossil fuels that would be consumed in processing algal oils (2), would be the equivalent of taking 70,000 medium-sized cars off the road (3).”

(1) If you feed CO2 waste from power-stations to algae to produce fuel, all you’re doing is delaying its release to the atmosphere. Sure, it may be efficient to make use of a concentrated source of CO2 in this way, but it doesn’t ultimately keep that CO2 out of the atmosphere. To do that you’d have to destroy it or bury it or otherwise dispose of it.

( 2) It’s wrong to say “fossil fuels” are used to provide the energy to produce biofuels, even though this is often seen. The energy could come from the biofuels themselves, so it has to just be considered as an efficiency reduction.

Algal biofuels are clearly preferableto agrofuels (biofuels from agricultural products), but I suspect that if we end up producing energy in such a capital-intensive fashion, solar will win out (see Biofuels Are Not the Answer). The issue is whether complementary products (electric cars or even the electrification of the UK railway network and batteries or other storage) arrive in time. It’ll be interesting to watch. The battle will make VHS vs Betamax, HD-DVD vs Blueray look like a minor scuffle.

Another reason for backing electricity, though, is the problem of local emissions – urban air pollution – which biofuels do nothing to solve. I suspect air quality will become a huge issue as ever more people can afford to be concerned about pale green issues. By “pale green” I mean environmental issues of direct personal concern. As people get wealthier, they are prepared – or able – to sacrifice some further economic gain for enhanced quality of life.

January 23, 2008

“Mortgage lenders seeking public support to plug a £30bn ($59bn) funding shortfall and sustain lending to homebuyers will find little comfort in Tuesday’s speech by Mervyn King, Bank of England governor.

A tightening of credit conditions for both households and companies ‘is unlikely to be short-lived’, Mr King said, but while the consequences could be painful, he maintained that a rebalancing of Britain’s debt-laden economy was necessary.”

What the esteemed Governor appears to be saying is that he wants to see an unravelling of debt. Personally I’d say the most desirable thing would be for this to happen gradually, over a decade or two, through the careful application of a clear policy agenda determined by a painstaking analysis of the root causes of our problems, but King is quite happy, it seems, for this to happen in an entirely uncontrolled manner through what looks more and more like a coming economic cataclysm – housing market collapse, negative equity, repossessions, bankruptcies… Hmm. And it’s all his fault and he doesn’t see it.

I saw an article in yesterday’s Metro (London Underground distribution, maybe online but I can’t be bothered looking for it): “The average age for a man to become debt-free is 52 and 47 for a woman” according to a poll, it said. Let me put it to King is that the people spending recklessly are not on the whole those in debt. The people spending the money are those controlling a large proportion of the country’s wealth – predominantly older property-owners – and those on high incomes. The people running up debts are those struggling to get on the housing ladder and those on low wages. All I’m doing is extrapolating a little from the argument that is often made, that high house prices represent a transfer of wealth, mainly between the generations, but also to the property -owning classes from those families buying property for the first time. In other words, the Governor’s basic premise may well be false. Perhaps some research needs to be done before we proceed directly to Judgement Day without passing Go, à la King. Perhaps the indebtedness of the nation is not a direct result of greed. Just perhaps, I suggest, both excessive indebtedness and excessive consumption have been caused – to a large degree in separate ways – by a third factor: inequality. Oops.

And who do you think will be hammered by higher real interest rates, “risk premiums” and a squeeze on the availability of consumer credit?

Yes, house prices will come down, but this will take years to work through. In the meantime, those who will suffer are those who are already mortgaged to the hilt trying to buy a home or otherwise struggling to make ends meet.

This fool, King, has overstayed his welcome already by allowing Northern Rock to fail, and now, in a display of mind-blowing hubris, he is preparing to fiddle while we are all burned by a recession. I’m sure Gordon will not want to let Mervyn join the ranks of the unemployed, but he really must do so, so that the debate can move on to first, how we ease the immediate crisis – liquidity is what’s needed, rather than lower interest rates per se, though if the only medicine in the cabinet is a drop of Base Rate that’s what the patient should be given – and address the long-term, structural problems.

Not that it’s just King’s fault. The current consensus on what central banks should be targeting is fatally flawed. The problem has been the utterly abject total failure to control property inflation. Those responsible – the leaders of the present monetary establishment around the world – should hide their faces in shame. Perhaps the best thing they can do is emulate the late John Profumo, who after the disgrace of the eponymous affair, dedicated himself to doing good works for the needy.

Martin Wolf’s column today (and the Taylor paper it references) show clearly what’s happened. Interest rates were far too low for far too long. OECD central banks, I suggest, have all been targeting the wrong inflation measure. They’ve targeted inflation measures more influenced by global than domestic forces. It would have been preferable to target just house prices – though arguably what they really need are more levers. Here is my idea: targeting the affordability of housing by raising wages – through increases in the minimum wage – would leave them able to continue to act in concert to control global inflation by targeting the inflation indices they use today.

January 17, 2008

I’ve been using their new iPlayer to try to catch the odd programme I’ve missed. Such as “Can Gerry Robinson Save the NHS? – One Year On”, originally broadcast on 12th December 2007. I downloaded it on 13th December and it stayed in my iPlayer library until I realised it was about to timeout (why? – yes, exactly, why?) on 11th January. So I dropped what I was doing and tried to watch it…

Guess what? The wallies had only let everyone download just the first 24 minutes and 7 seconds of a 60 minute programme. They’d known this for some weeks before I tried to watch it of course. Did they do anything about the people who’d downloaded the defective file? Did they heck!

To cut a long story short, I tried to log the problem and got error codes on their problem-reporting “webform” (they don’t just provide an email address, that would be too simple). I eventually rang them, and found out that yes, they had put a short file up for download, and, no, it didn’t occur to them to actually do anything to put the problem right. The period when the download was available was allowed to expire after 7 days, as usual, and the DRM would prevent anyone watching it after 30 days. They didn’t try to contact those who had downloaded the duff file. No special arrangements were made to extend the programme’s availability. To cap it all, I was cut-off when I tried to log a complaint.

What concerns me most, though, is not the BBC’s typical public-service attitude to customer-service, but their whole strategy, of which this is a symptom. They are a public-service broadcaster with a monopoly bolted on the side.

What do I mean by that? Well, if they were a pure public-service provider, they would surely:

1. Maximise the availability of content to licence-payers.

2. Produce as much content as they can afford from the licence-fee, and not try to boost their income by selling DVDs, using 0870 numbers for tech support, etc.

But their mission is totally compromised by trying to make a bit of extra money on the side. By doing this, they reduce the value of their content to the licence-payer by a vast amount, in order to make a relatively small amount in extra sales. For example, any fool can see that in future we will consume most content on-demand. If the BBC is to maintain the licence-fee model – and compete with other providers – it has to remove all restrictions on when viewers can watch this content. Trying to keep it free (to licence-payers) AND restricted (so further sales are possible) is incoherent.

And then, like all monopolies, Auntie treats its product as a cash-cow. Monopolies tend to shrink, because, due to one of the irresistible laws of the grey science, you maximise your profit (especially when people have very unequal ability as well as willingness to pay) by selling fewer items at a higher cost. Ideally, you’d just sell one copy of Doctor Who, for about £10 million – to Bill Gates, say. This is why BBC DVDs are so expensive, when they have already been paid for by the licence-payer. And the BBC’s public-service mission is undermined, because, to ensure a market for the DVDs for popular programmes they have to limit the number of times they are shown (despite the availability of BBC3, 4… to show them on). As we move to on-demand viewing, there is a complete contradiction between DVD sales and public-service broadcasting.

OK, I know there are 3rd parties involved – production companies – but the BBC is not there to create a market for DVDs. They should buy programmes outright. This would maximise value for the licence-payer. And if people didn’t need to buy DVDs, we might find they were prepared to pay a bit more on the licence fees.

Even worse, when it comes to programmes like “Gerry”, there is a limited after-market, so it is madness to restrict access to 7 days to download, 30 days to watch.

The BBC needs to decide whether it is a public-service broadcaster or a business. It can’t be both.

Here’s a short paper I wrote a few month’s ago. It is entirely unjustified to assume that it is possible to “displace” fossil fuels using biofuels, or offsetting carbon emissions by paying for a renewable energy project. Sorry, the oil will not magically stay in the ground! If you don’t buy it, someone else probably will.